PPC for eCommerce Means Bidding for Revenue

What if you knew that for every dollar you spend on AdWords you could earn five dollars back? Being successful at PPC for eCommerce requires a change in thinking. It requires bidding for expected revenue, versus bidding for clicks or conversions. Bidding for revenue sounds complex, but it’s pretty simple if we draw it out.

First, here’s how you might assume selling with AdWords works...

You bid on a keyword.

When someone enters your keyword as a search term, AdWords displays an ad.

When the ad is clicked it takes the user to your landing page.

The user purchases a product.

Therefore, you may mistakenly believe that there is a firm relationship between the keyword you bid on and the product that is sold. Additionally, you may mistakenly believe that the keyword that sells the most products is the most valuable keyword and set your bid according to the number of conversions, not the value of the conversions.

The source of all of this confusion is how AdWords reporting works. The only information you get is keywords, costs, and conversions. You get value (revenue) per keyword in Adwords and the products that sold are never reported! Keywords are NOT products!

Here’s how it really works:

You bid on a keyword.

When someone enters your keyword as a search term, AdWords displays an ad.

When the ad is clicked it takes the user to your landing page - Here’s where the shift to reality occurs...

The user then browses the site and may purchase one or more products.

When the user checks out, the sub-total must be attributed back to the keyword.

You cannot control what people purchase in AdWords based on keywords, ads, or campaign structure. You can certainly influence it, but you can’t control it. Why? Because Google AdWords is built around keywords, not products. There is no measurable link between keywords and products in AdWords.

In reality, someone searches for a keyword, clicks your ad, comes to your site, and then they can browse your site. They may end up buying the product on the product landing page, or something else may catch their eye, or they may read reviews and buy something else. But when they purchase something, you now have a strong, measurable link between the keyword and the amount of revenue that the keyword generated.

Therefore, you must bid on a keyword’s ability to generate revenue and NOT on which products you expect to sell.

Here’s a quick example to demonstrate my point: Let’s say you are an electronics seller and have the keyword for “Samsung Smartphone.” Out of 100 conversions you may actually sell 40 Galaxy s3’s, 30 Galaxy s4’s, 20 phone covers, and 10 iphones. So, you were able to influence what someone bought, but not control it. You are then able to measure that “Samsung Smartphone” resulted in $10,000 of revenue. And if you can measure it, then you can improve it!

So, armed with this new knowledge you are able to bid on keywords with confidence, knowing how much revenue you can expect them to generate. If you are willing to spend 20% Cost per Value (CPV), then you now know that for every dollar spent you’ll earn five dollars back. Cha-ching!

Why else should you care? Because your competition is still bidding for conversions, not revenue expectations. You’re willing to bid more for the keywords you know will make you more money. Meanwhile, you’ll pass on the keywords that don’t earn you money. Double Cha-Ching!